Oliver Blume’s VW jobs victory leaves power questions untouched

{"text":[[{"start":10.26,"text":"Volkswagen’s breakthrough deal with workers has handed chief executive Oliver Blume a hard-fought endorsement of his fight to preserve the group’s industrial relevance."}],[{"start":20.8,"text":"Shares in Germany’s largest carmaker briefly jumped almost 9 per cent on Friday after its supervisory board unanimously approved a radical plan to slim the group through 50,000 job cuts and opened the door to ending new vehicle production at four German plants."}],[{"start":36.84,"text":"Days earlier, the prospects for a deal had seemed bleak as marathon talks with unions turned acrimonious. VW even considered bypassing the supervisory board through an extraordinary shareholder meeting, according to people close to the company, while some analysts had predicted Blume could be replaced had he failed to secure an agreement."}],[{"start":57,"text":"But for long-term investors, more than jobs and plants were at stake. The talks were a test of whether the group could break from a governance system in which managers, workers, politicians and family shareholders had repeatedly hampered efforts to improve competitiveness."}],[{"start":null,"text":"

"}],[{"start":72.48,"text":"“This shows that there is a genuine willingness to reform at Volkswagen,” said Ingo Speich, head of corporate governance at Deka, Germany’s second-largest asset manager."}],[{"start":82.94,"text":"He cautioned, however, that implementation remained a “momentous challenge” and could not be taken for granted. “We have repeatedly seen in the past that decisions were taken by the supervisory board, only for the situation to look different again three months later.”"}],[{"start":97.04,"text":"VW, a stalwart of the German economy with roughly 620,000 workers worldwide, has come under intense pressure since the pandemic from shrinking sales in China and lacklustre demand in Europe. The day the group agreed to the job cuts, Xiaomi announced its entry into Germany and other European markets, underscoring the rising threat of Chinese rivals."}],[{"start":120.2,"text":"Blume told analysts on Friday that discussions with unions would begin immediately to finalise the job cuts, half of which are expected to be in Germany. The measures will bring the total headcount reductions since 2024 — when the group struck a deal with unions in which compulsory redundancies were ruled out until 2030 — to more than 100,000."}],[{"start":137.04,"text":"UBS estimated that the restructuring costs could reach up to €7bn, while Bank of America forecast up to €10bn in gross charges."}],[{"start":146.44,"text":"The deal implies Volkswagen will cut global production capacity by a quarter from 12mn vehicles pre-pandemic to 9mn a year, roughly in line with sales volumes since the pandemic. About half the reduction will come in Europe and the rest in China."}],[{"start":162.6,"text":"Unions and Lower Saxony, VW’s second-largest shareholder and home to many of its factories, stressed that the deal did not involve immediate plant closures."}],[{"start":172.32,"text":"Blume said no new models would be allocated to plants in Emden, Zwickau, Hanover and Neckarsulm beyond 2031, while alternative uses would be considered for the facilities, including defence and production of humanoid robots."}],[{"start":null,"text":""}],[{"start":186.24,"text":"Lower Saxony’s prime minister Olaf Lies suggested on Friday that plants outside Volkswagen’s home country should bear the brunt of the cuts."}],[{"start":194.24,"text":"“If we have to reduce capacity in Europe, the answer cannot be that we reduce that capacity in Germany,” he said, adding that it was “currently unthinkable” for vehicle production to end in Emden or Hanover, which are both in his state."}],[{"start":207.92,"text":"However, UBS analyst Patrick Hummel said there was “not necessarily an obvious use case for all these plants. I expect at some point we will see some closure decisions.”"}],[{"start":223.38,"text":"Hummel said the latest measures would help “safeguard” VW’s profitability but questioned whether the group could reach its 2030 target of a 9 per cent operating margin as Chinese groups gain market share around the world."}],[{"start":231.4,"text":"Moritz Kronenberger, portfolio manager at Union Investment, said the “severe cuts” had been necessary to avoid underutilised plants creating a “financially disastrous situation” for Europe’s largest carmaker, “potentially pushing its margin into negative territory”."}],[{"start":246.76,"text":"He added that the agreement had also shown that “employees and management are, after all, pulling in the same direction. The ball is now entirely in the management board’s court. There are no excuses left.”"}],[{"start":258.16,"text":"Yet one of the most contentious parts of Blume’s revival plan — splitting the core Volkswagen brand and the group’s components business into separate entities — appears to be unresolved."}],[{"start":268.82,"text":"Such a move could dilute Lower Saxony’s influence and overhaul a governance structure built around co-determination between unions, employers and the group’s owners."}],[{"start":280.54,"text":"The Porsche-Piëch family holds 53 per cent of the voting rights, while Lower Saxony has 20 per cent. Under German law, workers have 10 representatives on the 20-person supervisory board."}],[{"start":292.44,"text":"Lies said a potential carve-out, which he opposes, was “discussed for a very long time” at the supervisory board meeting but ultimately pushed back, with management instead instructed to work on changes to speed up decision-making."}],[{"start":305.64,"text":"Horst Schneider, Bank of America analyst, wrote in a note that “the Porsche family appears to have compromised on an immediate change to VW’s legal and governance structure . . . The issue is not off the table but may be decided later.”"}],[{"start":319.32,"text":"Hendrik Schmidt, head of stewardship at Germany’s largest asset manager DWS, said Thursday’s agreement “would probably not have been possible” had the supervisory board not postponed the spin-off plan."}],[{"start":330.8,"text":"“The fact that the Gordian knot in Wolfsburg appears to have been cut will initially come as a relief to investors. In terms of governance, however, there has been no progress,” Schmidt added."}],[{"start":341.12,"text":"Christian Strenger, professor of corporate governance at Frankfurt School of Finance & Management, said the deterioration in VW’s business since the 2024 restructuring meant the decision to “cut significantly further now” had been inevitable."}],[{"start":354.88,"text":"“Volkswagen still spends far too much time dealing with internal problems that should have been resolved long ago,” he added. “That prevents management from moving the company forward.”"}],[{"start":371.24,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1788757327_8391.mp3"}